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Microcredit And Mechanism Design

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Author Info

  • Robert M. Townsend

    (University of Chicago,)

Abstract

Individual microcredit loans are not necessarily simple fixed debt obligations, but rather may have contingencies and procedures suggested by the theory of mechanism design. Further, group or joint-liability lending may not be the single miracle cure practitioners claim nor operate the way the logic of a single theory might suggest. There are multiple theories, these theories can be distinguished in data on repayment rates, and the best-fit theory may vary with the environment. Finally, the debate about whether to lend to individuals or lend to groups may be misplaced. Under simple theories of selection, the Pareto superior regime, which is predicted to emerge, varies with exogenous environmental characteristics. (JEL: D5, D82, G2, O17) Copyright (c) 2003 The European Economic Association.

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Bibliographic Info

Article provided by MIT Press in its journal Journal of the European Economic Association.

Volume (Year): 1 (2003)
Issue (Month): 2-3 (04/05)
Pages: 468-477

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Handle: RePEc:tpr:jeurec:v:1:y:2003:i:2-3:p:468-477

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Cited by:
  1. Renaud Bourlès & Anastasia Cozarenco, 2013. "State Intervention and the (Micro)Credit Market in Developed Countries: Loan Guarantee and Business Development Services," Working Papers halshs-00811191, HAL.
  2. Casey B. Mulligan, 2011. "The Expanding Social Safety Net," NBER Working Papers 17654, National Bureau of Economic Research, Inc.
  3. Casey B. Mulligan, 2012. "Do Welfare Policies Matter for Labor Market Aggregates? Quantifying Safety Net Work Incentives since 2007," NBER Working Papers 18088, National Bureau of Economic Research, Inc.
  4. Arnold, Lutz G. & Booker, Benedikt, 2013. "Good intentions pave the way to … the local moneylender," Economics Letters, Elsevier, vol. 118(3), pages 466-469.
  5. Madajewicz, Malgosia, 2011. "Joint liability versus individual liability in credit contracts," Journal of Economic Behavior & Organization, Elsevier, vol. 77(2), pages 107-123, February.
  6. Renaud Bourl�s & Dominique Henriet, 2012. "Risk-sharing Contracts with Asymmetric Information," The Geneva Risk and Insurance Review, Palgrave Macmillan, vol. 37(1), pages 27-56, March.
  7. Daripa, Arup, 2008. "Optimal collective contract without peer information or peer monitoring," Journal of Development Economics, Elsevier, vol. 86(1), pages 147-163, April.
  8. Abdul Karim, Zulkefly, 2009. "Microfinance and Mechanism Design: The Role of Joint Liability and Cross-Reporting," MPRA Paper 23934, University Library of Munich, Germany, revised 12 Jan 2010.

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